Unemployment rises to 9.9%; Update: U-6 rises to 17.1%

posted at 8:53 am on May 7, 2010 by Ed Morrissey

Once again, the numbers on unemployment tell a conflicting story. The unemployment rate rose to 9.9%, but job growth appears to have finally begun in April, with the addition of 290,000 jobs, including 66,000 Census jobs. Most sectors saw growth, but the returning job seekers overwhelmed the opportunities:

Nonfarm payroll employment rose by 290,000 in April, the unemployment rate edged up to 9.9 percent, and the labor force increased sharply, the U.S.
Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, professional and business services, health care, and leisure and hospitality. Federal government employment also rose, reflecting continued hiring of temporary workers for Census 2010. …

In April, the civilian labor force participation rate increased by 0.3 percentage point to 65.2 percent, as the size of the labor force rose by 805,000. Since December, the participation rate has increased by 0.6 percentage point. The employment-population ratio rose to 58.8 percent over the month and has increased by 0.6 percentage point since December. …

In April, nonfarm payroll employment rose by 290,000. Sizable employment gains occurred in manufacturing, professional and business services, health care, and in leisure and hospitality. Federal government employment increased due to the hiring of temporary workers for Census 2010. Since December, nonfarm payroll employment has expanded by 573,000, with 483,000 jobs added in the private sector. The vast majority of job growth occurred during the last 2 months.

The news was mostly good in most sectors. Manufacturing was up 44K, mining added 7,000 jobs, construction continued its rebound with a +14K, and leisure and hospitality added 45,000 jobs. That’s a good showing and an indication that the job market has finally stabilized.

It’s not all good news. There are two million more people not in the labor force now than a year ago, with about the same number of people desiring a job (5.865 million to 5.868 million in April ’09). Those marginally attached to the labor force are significantly higher now (2.432 million) than a year ago (2.089 million). Both numbers, though, are improvements over March 2010 and before.

On the decline, the Obama administration was able to claim lower numbers by using the unemployment rate and avoiding the issue of discouraged workers. They’ll pay for that on the incline as those workers start looking for jobs again. For the next several months, that unemployment rate may hide good news as it hid the bad news last year.

Update: The Wall Street Journal notes that the U-6 number that calculates complete unemployment and underemployment also rose:

The 9.9% unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The number ticked up this month as more people came back into the labor force to look for jobs.

The U-6 figure includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.

What does the divergence of the U-6 number and the base unemployment rate mean?

A U-6 figure that converges toward the official rate could indicate improving confidence in the labor market and the overall economy. This month pushes convergence even further away.

True, but it’s important not to oversell pessimism, either. In order to bring both numbers into line with each other, we need overall job growth first. We have that in April’s figures. It’s not enough to make everything all right, of course, but it’s finally a step in the right direction. If it doesn’t pick up some momentum this month, then the growth can be called a fluke.

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people who had given up looking for work are reentering the job market, which increases the unemployment rate. together with the 290,000 new jobs, this is actually a very good sign – not for conservatives, obviously.

sesquipedalian on May 7, 2010 at 9:05 AM

Why, even politically speaking, conservatives can still bang Obama over the head. He promised millions of jobs created in a timely manner, keeping unemployment below 8%. We’ve lost millions of jobs and the unemployment rate is 9.9%.

I had early retirement but the company I worked for went bankrupt and so did my retirement. I went to work for AT&T at $8.00 an hour plus commission, inbound sales and I worked for them for 8 months and with commission I was on track to make $36,000. This was non-union by the way.
They are reducing their work force and newbies are the first to go. I was working part time selling health care insurance and will continue in the insurance biz but expanding my products. It takes money to find clients and as an independent agent, I bear all of the cost.
My early retirement payment was to start when I turned 59 1/2 and it did in December but was reduced to $262 a month.
Thanks for your encouragement!

Easy for someone without any roots. Those of us with houses, kids in school and spouses with jobs find it pretty hard to just pack up and move and with the housing market down it’s hard to sell your house. I know a few people who have tried packing up and moving for a new job and found themselves in more trouble because of a now unemployed spouse and a house they can’t sell and still have to pay a mortgage on.
I’ve be been applying for jobs in other states but have the problem that it can’t be just any job and has to be able to support my new and old household while I get established. Those jobs are not so many and nobody has even responded to my attempts except for one company that said they are not willing to employee people who need relocation even though I have stated on my cover letters I’m willing to pay for relocation. I’m also finding it hard to find employers willing to take me on if I live more then 30 mins from them or will be restricted by mass transit into the city. My type of work demands 24/7 support capabilities and an hour ride into work does not provide a quick enough response for many employers.

I can see November from my house. If we add 400,000 jobs a month for 2.5 years, we will be at the level of employment under Bush.
Then there will be thousands in the donkey business unemployed in November.

I’m waiting for all of the census workers to be laid off. That’s when the fun begins. Not to mention that when gas prices rise from the lack of offshore drilling, tourists destinations laying off people because people don’t want to pay high gas prices, and the rise in energy costs that people won’t use their money for traveling… yes, everything will be coming up roses then.

On the decline, the Obama administration was able to claim lower numbers by using the unemployment rate and avoiding the issue of discouraged workers. They’ll pay for that on the incline as those workers start looking for jobs again.

No, they won’t. They’ll just move the goalposts again. And the MSM will play along like we were always at war with Eurasia.

Thank you for your thought-provoking reply. As a long-time retiree, and rather cloistered, I am obviously in need of an update in today’s working environment. (I never had the problem of a working spouse to deal with).

These numbers do not include the numbers, my daughter included, who finished school and are now actively seeking employment – almost ANY employment – and are still seeking a year later. Apparently, even hamburger flipper positions are full or being eliminated.

These numbers do not include the numbers, my daughter included, who finished school and are now actively seeking employment – almost ANY employment – and are still seeking a year later. Apparently, even hamburger flipper positions are full or being eliminated.

Mommynator on May 7, 2010 at 11:26 AM

Exact same situation. Taco John’s, Burger King, McDonald’s…all full. Managers are torn between hiring older people desperately trying to pay their bills, and younger people trying to even get on the first rung of the ladder of success.

As long as that keeps up for another 3 years, we might get back to where we were. Of course by then we will have sovereign and municipal defaults all over the place, a bunch of new taxes, the full costs of ObamaCare kicking in….

That’s a good showing and an indication that the job market has finally stabilized.

That’s interesting as well.

My last job was as a Product Manager for a industrial water filtration manufacturer, the kinds used on boilers and chillers and cooling towers. My job was moved to Florida because of the economic climate in California. I have maintained contact with Regional Sales Managers and co-workers over the last year since I was laid off.

In the last month over half the Regional Sales Managers have been laid off and the entire North American region has been divided between 3 individuals and 1 is actually not a Sales Manager but the President of the manufacturing facility doing double duty. My co-worker who took on the remaining job activities from me as Product Manager in CA got laid off so there is only manufacturing personnel. The main engineer was laid off and the laid off one of their Product Managers in Florida as well. Again, this all happened in April. To me, that doesn’t sound like labor is stable. Let me point out that industrial water filtration is a must. There are many health standards for it and it goes alone with any retrofit, addendum design, or new construction and they are always included in any municipal building activity. Basically, as municipalities go so does the economy. We see it first.

Let me point out that industrial water filtration is a must. There are many health standards for it and it goes alone with any retrofit, addendum design, or new construction and they are always included in any municipal building activity. Basically, as municipalities go so does the economy. We see it first.

Sultry Beauty on May 7, 2010 at 11:48 AM

You’re absolutely right, and your story gives me chills.

One thing I noticed right away in my culinary classes was that without a constant supply of clean water…the entire foodservice industry would come to a halt. No water for dishwashing? Nobody cooks so much as a doughnut. End of story. When a main pipe was cut off a couple weeks ago for maintenance, it made that need even more clear.

You really don’t think much about the absolute need for clean water for civilization until you can’t even get a drink from a public fountain or use the restroom.

Well, that’s actually a different kind of piping than what I’m talking about. Actually what I’m talking about is included in much more basic construction, the application is boilers or cooling towers. So you get a picture of what I’m talking about, think of any action movie where you get a helicopter shot of skyscrapers. Now go back in your mental data base and do you see those metal boxes with steam coming out the top? Those are referred to as cooling tower. Industrial sized buildings use piped in water to heat and cool the buildings. The pipes run throughout the construction of the building. I won’t go into the concept of a cooling tower but suffice it to say, filtration is required to keep the water flow going.

So what’s the U6 number looking like, y’know the one that’s closer to reality?

When all high school and college kids graduate this month and the census workers get laid off the actual unemployment number will shoot back up. Many people back in the workforce are not permanent employees.

The notion of permanence in employment is now as valid as believing in the Easter Bunny. (Who incidentally the regime blames for bad unemployment figures last Month).

The report is echoing the regime talking points that the increase in unemployment is really a good thing, because more people are looking, or something.

I know just what you are saying. I keep being told by headhunters that my skills are in demand, project management and design in the IT sector, yet they are unable to get me any interviews. I’ve even tried entry level to mid range positions and have only gotten a few interviews over the last two years. I keep hearing about job growth but I have seen more people I know being let go then hired. There is also a sigma surrounding people that have been let go. I know quite a few people that have quit one company for another. The employers don’t want somebody that was let go and prefer people currently employed which doesn’t help the unemployment problem. I even had one potential employer criticize me for waiting until I was unemployed to seek new employment.

“That’s a good showing and an indication that the job market has finally stabilized.”

Ed,

There are thousands of factors that affect the job market. There are also dozens of events pending in the near and mid term that could send things in the other direction. Due respect, you don’t know enough to make that statement.

One report of some modest gains in certain sectors does not necessarily indicate anything in and of itself. If this trend continues for several months and survives the tax increases, the costs of ObamaCare and the other market intrusions the Democrats have up their sleeve, THEN we might have something to cheer about. You should stick to political commentary and leave the economics to your betters. Ask Peter Schiff what he thinks about prospects going forward.

One thing I can tell you right off the bat is that the potential sovereign and municipal fiscal defaults could throw an ENORMOUS monkey wrench into any sort of recovery. I think you are looking at this as if this is a garden variety recession/recovery cycle, it isn’t.

When does the rioting start? When are people going to be set fire to on the streets here? We are out of money, out tax revenue won’t service the interest on our debt. This whole thing is a mirage about to shatter.

The 9.9% unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The number ticked up this month as more people came back into the labor force to look for jobs.

How do they know? How do they know if I walk into a place and hand them a resume? Do they only count people on unemployment? I know quite a few people looking for jobs that don’t get unemployment. Do employers have to count every contact they have, every resume sent to them?

I dhunter have witnessed the job growth!
Since the snow melted there’s lots more lawns being mowed, pools being cleaned, survival shelters being built by home builders who don’t work much in snow storms and freezing temps and of course mining can pick up now that the winter blizzards have stopped.

Oh how could I forget those POOL jobs? I pick my son up from college this weekend and he and every other college kid in the nation , almost, applied for their summer jobs back. Soon you’ll see an uptick in LIFEGUARDS!

Easy for someone without any roots. Those of us with houses, kids in school and spouses with jobs find it pretty hard to just pack up and move and with the housing market down it’s hard to sell your house. I know a few people who have tried packing up and moving for a new job and found themselves in more trouble because of a now unemployed spouse and a house they can’t sell and still have to pay a mortgage on.
I’ve be been applying for jobs in other states but have the problem that it can’t be just any job and has to be able to support my new and old household while I get established. Those jobs are not so many and nobody has even responded to my attempts except for one company that said they are not willing to employee people who need relocation even though I have stated on my cover letters I’m willing to pay for relocation. I’m also finding it hard to find employers willing to take me on if I live more then 30 mins from them or will be restricted by mass transit into the city. My type of work demands 24/7 support capabilities and an hour ride into work does not provide a quick enough response for many employers.

Ragamuffin on May 7, 2010 at 10:38 AM

This is exactly what we just did- moved from Ohio, where the economy is pretty much over, to Utah, where it is booming. When my clever husband did his job search, he only looked and applied for jobs where the economy is still ok. When he got his new job, they would not pay for relocation, and wanted him to start in less than 3 weeks. So we packed up everything from a house we had lived in for ten years, and drove thousands of miles, and here we are. We had to sacrifice to make it work- we dropped the price on our old house drastically, and found a really hungry realtor to sell it for us. We should close on it soon. We have been paying rent and mortgage for two months and are almost tapped out, but the way we look at it, we could stay in an area with no opportunity and continue to worry and stagnate, or we could branch out on an adventure and make a new start. All those roots you have are no good if the roots are dead. People need to be brave and capture some of that good old American frontier spirit and go for it. And yes, we pulled our kids out of school in the middle of the year- we figured a little trial and change would be good for them. We aren’t raising hot house flowers. We decided to start homeschooling as well, and it is a blast. I know what you are going through, and we may not make it- our house deal could fall through, but we figure what is the worst thing that could happen? So we lose our house and have to rent. Pretty much like everyone else. At least we have been employed through this whole thing, haven’t taken any handouts or loans, and are almost debt free. We may have to start over a little, but that is ok. If you don’t take risks, you can’t ever get a taste of the glory. Our whole country seems to be scared to act.I hope it is not that way in November.

66,000 jobs added for the census last month… what we should also note is that the “birth-death model adjustment” added 188,000 as well. The birth-death adjustment was double what it has been in the last few months… thereby propping up the numbers.

I suppose there is a five day work week too, huh? Right, as if people should be expected to work five out of seven days in a week.

Bishop on May 7, 2010 at 9:22 AM

LOL!I cannot believe how lazy people are. My mind goes back to that teacher story in RI where they refused to tutor an extra half hour or so per day & so the suptd fired everyone.
Now I honestly know that a little bit of tutoring time each day is NOT going to turn any problems like they have around, but what is the big deal?
As a teacher, I’ve got sweet working hours:
7:45am-3:35pm for 180days/yr.
Not bad.
A half an hr would be irritating only bcs I know it wouldn’t make any changes in test scores, but WTH.
Now if you made school a year round deal, then I wouldn’t be teaching. Bcs no amount of $$ you paid me would be worth that headache.

Kristamatic on May 7, 2010 at 1:02 PM

This really is just life, isn’t it?
I have an artist cousin in S. IN just waiting around for something to happen & working odd little jobs for a tree farmer.
He quit doing his pottery (very good) bcs no one is buying anymore.
I keep telling him that S. IN & OH is a dead zone & that he should consider other options.
But yes, he’s got ‘roots’ there, friends & family.
I have moved sling shot all across the country my whole life, packing whatever I had up in a small pick-up & moving across the country numerous times to follow better opportunities.
I am tied to the land now that I married a rancher, but he & I would both be able to move if we had to.
It’s how you take care of yourself & your family.
My pioneer ancestors, & many of all of ours, left the known for the scary unknown bcs they could see the situation wasn’t going to get any better where they were at.
Sometimes you gotta take a chance & put your future in God’s hands.

To be quite honest, the stock market fell more than it ever should have back in 2008. A lot of the growth we’re seeing the last year and a half is nothing more than a correction.

ButterflyDragon on May 7, 2010 at 10:58 AM

Would that be based on the Unicorns or Fairy Dust? The stock market is still twice what it was when it became all the popular rage to be in the market back in the early 90s. Even taking out the recessions we haven’t had enough GDP to double the value of America’s companies, and with at least 4 years of recessions mixed in, definitely not.

When Portugal, Italy, Irelang, Greece and Spain (the Piigs) start their tumbles and a world saturated with debt (personal, corporate and government) starts to follow like dominos over the next six months, you’ll see what the members of the market are really worth, minus value derived by borrowing.

I’d go into the economic catastrophe that we are on the verge of toppling into in more detail, but I don’t want to pop your rosy bubble :) It will, however, make the summer of 2008 look like a time of great prosperity and growth.

If you are averaging 450,000 NEW unemployment claims a week, and job growth is 224,000 taking out census workers, does that mean 2 million people were hired? Because 1.8 million minimum made NEW unemployment claims.

I understand U6 and all those, but can somebody explain how that balances?

How do they know? How do they know if I walk into a place and hand them a resume? Do they only count people on unemployment? I know quite a few people looking for jobs that don’t get unemployment. Do employers have to count every contact they have, every resume sent to them?

Ragamuffin on May 7, 2010 at 12:36 PM

The only ones counted are those within the unemployment system, “searching for jobs”

As to the other good point you made… with the advent and over saturation of “headhunters, electronic jobs boards, etc” – there are 3-10 times redundency within their data.

I mention this because not only are more people applying for jobs, but the actual “resumes” they see and screen have garbage “filters”, whereas qualified people dont get a phone call. Add in the majority of day to day headhunters are young, inexperienced – with 85% turnover… an artificial hurdle, due to ignorance also exists.

I got my last job by picking up the phone until I got a direct company HR contact and blew off the “send your resume to monster, http://www.jobshere, etc”. It was refreshing to get an agency owner who not only appreciated my approach, but agreed when I said “if you are looking for a business development partner, look for a guy like me who practices what I preach”

Its been a great 2 month relationship.

If you are looking for a job (or others) do not wait for the copy and paste “headhunter world” to give you a call. They have no idea what they are really looking for, except a bogus “placement %” Make it happen directly to a company. If they dont care to deal with you directly – pass on them. Most use a useless “word finder/phrase finder” piece of software to do the job for them.

What I wonder is how much of the $$ needed to build this is coming from federal govt sources?
And this plant was already slated to go but they backed off some when BO was spewing about Cap & Trade right when he got elected.
BO getting elected actually put a lot of energy related proposals on the back burner for a while in this state.

You know what would be really helpful in these unemployment number posts? If available, how about providing the unemployment rate with governmnet jobs EXCLUDED? That would indicate growth in the true economy instead of growth of government – which is actually a drag on the economy as government jobs mean taxes!

Also provide the growth in government jobs, so we can see how our government is growing (or, God-willing, contracting) in comparison to how the “real” job market is doing.

Just a suggestion, but its something I sure would like to see (and see addressed by you in the posts).

Thanks for the info. It was as I expected so the real unemployment rate is really much higher. I gave up on the headhunters about a year ago as I was getting mostly crap that I was not even close to being qualified for. I got wasted on a couple of interviews when both the interviewer and I realized that I wasn’t qualified. I hate the job filter engines. I think they are a cop out for a a lazy employer. I know when I had a job I use to fight with HR because I would be sent resumes of perfectly qualified people that had been rejected by our skills filter. It’s my opinion that employment practices went downhill when HR personnel became some sort of professional experts in hiring rather then just the clerks they use to be.

How many years would it take to bring down that unemployment rate with 260,000 jobs a month? Five years. If we are lucky.

They expected 200,000 job growth and the rate to stay the same. I am sorry, but I don’t see this as good news. I think people are running out of benefits and are being forced to look for anything they can find.

I know just what you are saying. I keep being told by headhunters that my skills are in demand, project management and design in the IT sector, yet they are unable to get me any interviews. I’ve even tried entry level to mid range positions and have only gotten a few interviews over the last two years. I keep hearing about job growth but I have seen more people I know being let go then hired. There is also a sigma surrounding people that have been let go. I know quite a few people that have quit one company for another. The employers don’t want somebody that was let go and prefer people currently employed which doesn’t help the unemployment problem. I even had one potential employer criticize me for waiting until I was unemployed to seek new employment.

Ragamuffin on May 7, 2010 at 12:24 PM

An echo of my experience, although I have the added “bonus” of being over 55. I too have heard the line from a headhunter that I would be easily placeable if I wasn’t unemployed. Great, penalize me for having been part of the financial services industry. What a lot of recruiters don’t understand is that quite often the last people retained by senior management are yes-men and lower paid individuals who just do whatever the captains of the sinking ship demand.

As to how the unemployment, employment and labor force numbers are determined you’d be surprised to know that is done via the BLS doing 60,000 telephone interviews each month. Yes, interviews which the questions are so convoluted that the BLS says with pride that at the end of the interview the interviewee will have no idea how they will be classified. (see http://www.eoearth.org/article/Measuring_employment_and_unemployment ) Luckily there is no chance that these numbers can be manipulated. /sarc

May 7, 2010 — A wild week in global markets overshadowed some good news about the American economy. The ensuing rush to safe-haven investments like gold and also US Treasuries has provided considerable benefit for mortgage shoppers. Ten-year treasury yields dropped sharply this week, pulling mortgage rates back down.

After a long run up over the past couple of months, stock markets have been a little uneasy in the last couple of weeks, all related to concerns about the Greek debt market crisis. Worries that these debt-default troubles would spread to Spain and Portugal and possibly beyond have all been permeating under the surface, all to the benefit of US Treasury issues.

Thursday seemed like it would be a “normal” day, relative to the recent pattern of weaker equity markets, although into the typical mix was thrown an UK election and discussions on Capitol Hill about financial market reform. Fear and concern have certainly been a component of the marketplace of late, but no one could have been prepared for a nearly 1,000 drop in the Dow Jones Industrial Index, apparently triggered by one (or more) incorrect ‘program’ trades. That cascade created outright panic, at least for a time, and wariness remains the order of the day today.

HSH’s market-spanning Fixed-Rate Mortgage Indicator (FRMI) declined by xx basis points to close the weekly survey at x.xx% The FRMI includes rates for conforming, jumbo and the GSE’s “high-limit” conforming products in its calculation and so covers a wider audience than other surveys. The average 5/1 Hybrid ARM — presently the most popular alternative to the traditional fixed-rate mortgage came in at an average interest rate of x.xx%, down [some basis] points from last week’s x.xx%.

Conforming 30-year FRMs sported a daily average interest rate of x.xx% for Friday.

An accumulation of good news about the economy would normally have caused interest rates to flare higher, but not in this kind of climate.

Perhaps the best news is that, after three quarters of fairly solid economic improvement, job growth has finally emerged. April’s employment report found that some 290,000 new employees were added to payrolls, with the Census making up just 66,000 of them. Perhaps better still was the upward revision to March’s figure, now gauged at 230,000 and that the last four months are all now reported to have at least some improvement in hiring. While the April figure is barely enough to cover new entrants into the labor force, that the trend is strengthening is very encouraging about the sustainability of the recovery.

After a recession, an increase in hiring or the availability of jobs can cause disaffected workers to jump back into the labor pool. This in turn can cause an increase in the nation’s unemployment rate, and it did in the latest report, where it bounced from 9.7% in March to 9.9% in April. It is a quirk of the “household survey” which produces this; essentially, participants are asked two questions: “Are you working?” and if the answer is “No”, then “Are you looking for work?” If both are no, then they are considered out of the workforce and not unemployed. If the answer is “Yes, I’m looking” then they are included in the unemployment calculation. As prospects improve, these folks will come out of the shadows and tend to influence the unemployment rate upward until all seekers have found work.

Worker productivity has eased back from outsized levels, and this also may bode well for workers. The 3.6% increase in per-hour output for the first quarter of 2010 was a steep decline from the 6.3% gain in the end of 2009. If the decline in productivity is because workers simply can no longer meet production needs by ramping up output or expanding hours, then more workers will need to be hired to satisfy demand. Measured against the total costs of producing a given good, labor costs continue to decline, albeit at a slower pace. The 1.6% decline in per-unit labor costs should serve to enhance profits for business even as it helps keep inflation from forming.

While weekly unemployment claims remain stubbornly high, there were fewer announced layoffs in April. According to Challenger, Gray and Christmas, just 36,326 announced job cuts took place during the month. It was the smallest figure since 2006, well before the recession started, and government and nonprofits accounted for 40% of the reductions. At the same time, new claims for unemployment benefits came in at 444,000 for the week ending May 1, not much different than we’ve become accustomed to over the last several months. We’ll know the labor market has turned for sure when we are regularly closer to or below the 350,000 level (lower would be better, of course).

Some of those jobs seem likely to come from manufacturing, which continues to show surprising strength. Factory Orders for March kicked 1.3% higher than February, making March the eleventh month of the last twelve which has featured a gain. Given that backdrop, it’s little wonder that members of the Institute for Supply Management reported solid conditions. The ISM manufacturing survey for April rang in at 60.4, its highest reading since 2004. With production, new orders and the employment indicator all moving higher, prospects are improving for the economy as a whole.

Should some jobs return, there is considerable upside for certain sectors of the production-based economy. Sales of new autos were an annualized 11.2 million in April, eased somewhat from March by the expiry of extraordinary sales incentives related to Toyota’s troubles. Aside from that, sales are stable at better than recession levels, but remains a far cry from the 16 million plus levels seen before the downturn. If more folks find jobs, it stands to reason that more cars will start to be sold, which should hopefully lead to more jobs.

That would also be the case for the building trades. Construction spending gained 0.2% in March, but that was solely related to spending on public projects such as road and bridge rebuilding, and probably mostly at the Federal level. Most states, counties and towns are hurting for money and don’t have the cash needed to undertake large projects at the moment beyond repairs. Spending on residential projects has been spotty over the last couple of months, but turned negative in March, sliding 1.1% despite a flare in new home sales. Spending for commercial buildings has more recently begun a downturn, and there is plenty of existing space available going wanting for tenants at the moment.

Service-related businesses are showing some signs of life, too, although not nearly as robust as manufacturing. The ISM’s survey of non-manufacturing businesses in April sported a reading of 55.4, exactly the same as March. The largest portion of the economy is expanding, but at a moderate pace, and there is still a net loss of jobs coming from this sector. The employment sub-index of this survey still hasn’t made it over its breakeven point despite nine months of GDP growth; many services are more discretionary and with income and wages still meager, it may be a while until this piece of the economy gets rolling again.

Personal Incomes did rise a bit in March, climbing by 0.3%. Wages rose by a more muted 0.2% and are still quite soft. However, spending outlays have ticked up somewhat in recent months; the 0.6% lift in March came on the heels of a 0.5% rise in outgo in February. However, since outgo outstripped income again this month, the additional spending came from savings, and the nation’s rate of thrift decelerated to 2.7%. After a long pullback during the recession, consumers appear to be cautiously spending again, at least for needed replacement items if nothing else.

For the most part, consumers are spending without borrowing. Consumer borrowing expanded by a meager $2 billion in March, driven higher only by installment lending, largely for autos. Outstanding balances in revolving accounts — credit cards — continued their long decline, shedding another $3.2 billion during the month but are declining at a slower pace as households realign their balance sheets. As taking on new debt is an expression of confidence about one’s future present and prospects, it’s safe to say that we’ve not fully turned the corner in the economy just yet.

That can be seen clearly in surveys covering consumer moods. As noted last week, there has been little improvement in this regard despite more solid GDP readings. Although the weekly ABC News/Washington Post poll of Consumer Comfort did move two ticks higher during the week ending May 2, it remains mired near historic bottoms.

The latest Senior Loan Officer opinion survey regarding lending conditions for the second quarter of 2010 pointed to improving circumstances for some of those who need to borrow money. Overall, a slight loosening in credit terms and availability was noted, concentrated largely in the medium-to-large business sector. However, important to the fortunes of the housing market, just 1.9% of respondents reported tightening of standards for residential mortgages. Last year at this time, some 50% of banks polled were still tightening underwriting standards, itself a considerable improvement over the worst of the credit squeeze. Before credit easing can start to happen, tightening must cease, and we appear to have come to that crux point. Hopefully, it will come in time to help provide new support for the housing market, which has recently been set adrift on its own by the expiry of federal supports.

While we’re not in a position to evaluate out how this whole Greece and more mess will ultimately work out, there are a few consideration which will probably come to bear. The first is that any kinds of austerity plans which need to be enacted by troubled governments necessarily mean that those economies will grow more slowly than they otherwise would. To the extent that affects trade, other economies will be affected to a greater or lesser degree, and the worldwide recovery would be diminished to some extent. Slower growth may mean a less-robust recovery for the US, at a time when it is struggling to catch fire.

The second consideration is that, at least for a time, the US will benefit from this global fiscal unrest… at least until the spotlight turns upon our own debt-fueled recovery. The initial beneficial effects may wear off when questions about how we will repay the trillions of dollars of debt we are issuing come to the forefront, should concerns about out ability to repay come into question. These crises can be useful or even benevolent things, for some, like potential homebuyers or refinancers looking for rock bottom interest rates.

That said, it’s also worth saying that these panic fueled downdrafts in rates are untrustworthy things, subject to even faster turnarounds than the declines they enjoyed. This being the case, it’s an excellent idea to lock the rate for any mortgage you may be considering.

We didn’t expect a catastrophe-induced decline in rates this week. Rather, we thought the tenor of economic reports would be good (they were) and that rates would tick a little higher. Given they they went in the other direction, we’ll hold cautiously to an expectation for a little increase next week as some clarity comes to the marketplace.

Let me point out that industrial water filtration is a must. There are many health standards for it and it goes alone with any retrofit, addendum design, or new construction and they are always included in any municipal building activity. Basically, as municipalities go so does the economy. We see it first.

Sultry Beauty on May 7, 2010 at 11:48 AM

Can I get in constant contact with you? I’d like to have a tab on the pulse of the economy.

What I look for is trucking. I keep tabs on a number of trucker friends, and they’re finding it harder to find work.

If the truckers aren’t trucking, the economy isn’t recovering. You’d be another way to keep a finger on the pulse.

These numbers do not include the numbers, my daughter included, who finished school and are now actively seeking employment – almost ANY employment – and are still seeking a year later. Apparently, even hamburger flipper positions are full or being eliminated.

Yep; I have a degree and more than five years post-BA experience and the best job I could find pays $9/hour and only gives me part-time work.

But this is what they want; more unemployment equals more people looking to the government for assistance. Jobs are bad because they, like, create wealth and stuff and that’s not fair. Or something. It’s hard to think like Obama.

Perhaps folks need to start getting degrees in math & science.
It would certainly make you more employable in some places.
Engineers of mosttypesare usually always in demand.
I’m not sure if it’s a shortage or for a cheaper hire rate or maybe both, but Microsoft, HP, & other tech companies are always fighting for limited visas for these kinds of workers every year.
Most of the kids I teach I have seen are lazy & give up too easily.
Math isn’t always easy when you’re a teenager, but when you get older, just about anyone can get it.
I’m not a math whiz, but I worked hard & I got my BS & it’s really not that bad.
More people need to get better degrees & not waste their time with BAs in nothing.

One of our larger employers is firing older and non performing employees. Especially those with 20-30 years in. Then they hire younger less experienced workers and pay them less and they draw less on the retirement benefits. Many of those people never get hired, they are out of un and too young to draw on retirement funds. Where are these people in those BO numbers.